China launches $4.6b technology-focused guidance fund
The Beijing government has launched a RMB30 billion ($4.6 billion) innovation-focused fund-of-funds that will not only make investments locally but also commit capital overseas with a view to bringing technologies to China.
The Beijing Science & Technology Innovation Fund – which has received RMB12 billion from a municipal guidance vehicle under the Beijing government – is expected to reach RMB100 billion in size. When the fund was first announced last December, it had an initial target of RMB20 billion and various government agencies and state-linked companies had promised to contribute capital.
Li Yang, general manager of Beijing Science & Technology Innovation Investment Management – which is serving as the GP – said the plan is to deploy RMB5 billion in the first year across 25-45 funds. The GP wants to invest in no fewer than 100 funds in total, focusing on original innovation, business transformation, and precision industries, according to an announcement.
Key investment areas include LED technology, next-generation IT, nanotechnology, new materials and new energy, biopharmaceuticals, smart manufacturing, modern agriculture and transportation, energy conservation and environmental protection, big data, artificial intelligence, and quantum computing.
Private equity fundraising for China has been skewed by the arrival of large-scale government guidance funds that are intended to channel capital into new economy businesses or restructure traditional industries. A total of $111.6 billion was committed to China-focused funds in 2016, with three renminbi-denominated state-sponsored vehicles accounting for about $45 billion on their own. In 2017, two such funds contributed $25.5 billion to the country total of $80.5 billion.
While most of the mega vehicles have been national-level initiatives, several local governments have also been active. Last year, Guangzhou launched a state-owned enterprise restructuring fund with a target of RMB150 billion and initial capital of RMB50 billion. This was followed by Tianjin announcing it had raised RMB20 billion towards a total of RMB100 billion for investment in local pillar industries.
Some – but not all – of these vehicles are structured as fund-of-funds, with a view to allocating capital to private sector managers.
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